JPMorgan guilty plea asked by Holder shows tough bank stance

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon went to Washington almost a month ago to see if U.S. Attorney General Eric Holder would settle a criminal probe of mortgage fraud at the bank if it paid more money to resolve related civil investigations.

Holder’s team, which included Deputy Attorney General James Cole and Associate Attorney General Tony West, said ending the investigation by the U.S. attorney in Sacramento would require the bank to plead guilty to something, according to a person familiar with the talks, which were held in a conference room that was Robert F. Kennedy’s office when he had Holder’s job.

Later, the department proposed the bank plead guilty to making false statements related to sales of toxic mortgage bonds. The bank proposed a nonprosecution agreement, which Holder rejected, the person said. The bank agreed to assist the continuing criminal probe. The negotiation typifies the harder line the Obama administration is taking in its second term.

Holder, 62, in an interview with Bloomberg News about the department’s new aggressiveness on bank probes, said: “It was clearly a priority for the president, it was a priority for me and for this Justice Department. One look at the magnitude of harm and the number of people suffering as a result of these acts that we’re looking into made sense to me that my personal involvement was needed.”

Holder, a Columbia University law school graduate who has spent much of his career at the department, gave the interview just a few hours before he and Dimon agreed Oct. 18 to an outline of a record $13 billion accord to resolve the civil investigations.

Extracting Penalties

Holder’s refusal to let JPMorgan, the biggest U.S. bank, escape criminal liability for its mortgage-bond sales, and the move to extract penalties for wrongdoing that led to the financial crisis, may go a long way toward appeasing critics of the Justice Department who have been urging charges against bankers since the collapse of Lehman Brothers Holdings Inc. in 2008.

Joe Evangelisti, a spokesman for the New York-based bank, declined to comment on the talks.

The effort began on orders from President Barack Obama, who promised in his 2012 State of the Union address to hold banks accountable for their role in helping trigger the deepest recession since the Great Depression. A mortgage task force of prosecutors and regulators set up to carry out the president’s mandate produced the record $13 billion deal, which requires a formal sign-off by both sides